Business Valuation Blog | Understanding Buying / Selling a Company

Why should you insist on working with a certified business valuation appraiser?

Posted by Business Valuation Specialists LLC on Apr 4, 2018 2:29:00 PM

Though there are many reasons why you should have your business valued, working with the right business valuation appraiser is vital to making sure you get accurate results. One of the most important factors to investigate before you hire is whether the appraiser is certified. But why is the certification process important and how can it impact what you get out of your appraisal? Here's a quick look at why you should insist on only working with a certified business valuation specialist.

Why should you insist on working with a certified business valuation appraiser?

Let's look at a couple situations. A business needs to determine the value of their company and has a few options before them. In the first, the business gets an idea of what the company will be worth on the open market based on the determination of a real estate agent. It costs the business virtually nothing beyond a bit of time to get the appraisal completed. However, the final valuation may be based too strongly on the realtor's goals. But how do those goals impact the final value?

The realtor may be short of funds due to slow sales, and therefore suggest a price that is lower than may be reasonable due to needing a fast sale. Perhaps they're flush with cash and want to wait for the perfect buyer for a high commission down the road, regardless of how quickly you want to sell the business. They may not be familiar with the exact nature of your business, so they make a guess based on what little they do know without carefully considering the impact it may have on your bottom line.

Now imagine that the business hires a certified business appraiser. The certification process means that the appraiser hired can look at the exact situation for which the appraisal is needed. If a company needs to determine the value of a business for reasons other than a sale, the realtor's approach can be completely inappropriate. What if a business owner needs to make improvements? Many companies use business appraisals as a starting point to improve profitability and efficiency throughout its operations. Perhaps the business will be changing hands to the next generation and the current owner needs to know what their legacy is worth so they can decide how much of that value is a gift and how much will be needed for their retirement.

What if there's a divorce or lawsuit at hand that requires the business value to be disclosed as part of the proceedings? In many legal situations, the appraiser is required to use a particular methodology to generate the business' value for the court. A simple appraisal or guess at a value by a realtor won't hold up to that level of scrutiny.

It can be really tempting to try to save a few bucks by simply going with someone who doesn't have a certification, it's simply not worth the risk to your company and the problems associated with trying to work with a bad appraisal. By insisting on only working with a certified business valuation appraiser, you can ensure that your business' interests are protected in any number of situations. Fortunately, finding a certified appraiser is a fairly simple process, so make sure when you start looking at appraisers for your business needs.

Topics: business valuation appraiser